The pan-European FTSEurofirst 300 index provisionally closed the day 0.1 percent lower, but was set to post a gain of 16 percent for the year, its best annual performance since 2009.

The German DAX, which closed the year at 1300 GMT on Monday, has outperformed other regional benchmarks in 2013 with a gain of 26 percent, and hit a record high of 9,594.35 points in early trade on Monday, before drifting lower and closing 0.4 percent down on the day.

U.S. stocks held steady on Monday after data showed pending home sales edged slightly higher in November, with the S&P 500 readying for its largest yearly rise in 16 years.

The European healthcare sector was one of the biggest laggards on Monday. Sanofi shares werelower after its multiple sclerosis treatment failed to win approval from U.S. regulators.

Meanwhile, the European auto sector, home of BMW and Volkswagen, is set to post the best annual performance, up 38 percent. On the other hand, the STOXX basics resources sector has suffered during 2013, set to end the year down 14 percent.

Watchmaker Swatch saw its shares close down by roughly 1.01 percent after reports of a fire at one of its factories, which supplies parts to much of the watch industry.

Tesco shares closed lower, falling by 0.95 percent, despite India's foreign investment regulator approving a $110 million investment plan by the British firm, formally paving the way for the retailer to venture into Asia's third-largest economy.

In Asia, Japanese equities rose to a new six-year closing high on Monday, it's final trading day of the year, after dollar-yen hit new multi-year highs. Elsewhere, the rest of the region was mixed in subdued trade due to the holiday period.